The outpouring of cash raised during last night’s second annual American Idol “Idol Gives Back” charity fundraiser was, once again, very impressive. During the two-plus-hour event — featuring a star-studded cast of celebrities and singers such as Annie Lennox, Bono, Miley Cyrus, Mariah Carey, Fergie and many more — viewers donated an initial $22 million. Last year, the “Idol Gives Back” debut show and fundraising afterward raked in $76 million.
I hate to admit it, but I didn’t “give back” to the six wonderfully worthy causes promoted during the show (The Children’s Defense Fund, Children’s Health Fund, The Global Fund, Make It Right, Malaria No More, Save the Children). How could I be so callous, you ask? First of all, I already support several charities. Second, I have banned myself from making any new charges on my credit card until I pay the balance down. Which got me thinking about credit cards and charitable giving.
I presume that the majority of the “Idol” donations were made via credit card — numerous times during the show, viewers were urged to use their credit cards to make donations via phone lines and on the Web. My, how fundraising has changed since the days of the old Jerry Lewis telethons, where you called in, made a dollar commitment on the phone and then donor forms were mailed to your home to be filled out and returned with a check.
Charging your donation is an instant feel-good — until you get the bill. Perhaps even then you still feel good. But I wondered if people charged more than they could really afford to give? Probably. Charging more than you can afford is very easy. I’m not going to chastise those who gave as I, too, wish malaria, hunger and AIDS could be eradicated. I just wonder how many gave more than they really could afford.
During the first quarter of 2008, the average debt on credit cards rose 9.5 percent from a year ago, reports The Wall Street Journal. People living in some of the harder hit “subprime” areas of the country are charging gas, groceries, everything — not just big-ticket items — just to get by.
And what about the credit card processing fees on these “Idol” charges? I wondered whether the executives at Visa and Mastercard threw a companion “Idol” party to celebrate the biggest massive influx of cash in one night. Average processing fees (called interchange fees) run anywhere from 1 percent to 3 percent of each credit card transaction. Since the Idol Gives Back Foundation is a 501(c)(3) nonprofit organization, these fees may be tax deductible, but still, that revenue is nothing to sneeze at! For example, using an average 2.5 percent processing fee on $22 million yields $550,000 for the credit card companies. That $550,000 would buy 55,000 of those $10 mosquito nets needed to protect African children from contracting malaria.
Since 501(c)(3) nonprofits generally don’t have to pay taxes, the processing fees typically end up being categorized as an expense and aren’t deducted, says IRS spokesman Eric Smith.
When I asked Visa about whether processing fees are ever waived for charities, I got the following response: “Americans are increasingly pulling plastic instead of paper out of their wallets, for everything from monthly utility bills to charitable donations,” e-mailed a Visa spokesman. “Charities do pay for the ability to accept electronic payments, as they would any business expense. The cost depends on the charity’s agreement with its financial institution, which may include customer assistance and transaction processing services, among other services.
“In return, both charities and donors benefit from electronic payment donations. For charities, payment card transactions can help streamline financial record keeping, help fulfill a higher number of donation commitments, collect payments through a variety of channels such as the Internet, and lower costs associated with processing donations made by check or repeatedly having to mail reminders to donors. In addition, consumers can easily track donations via their monthly debit or credit card statement, which comes in handy during tax season.”
Britney charges back
For those who can afford to charge for charity, follow the example of Britney Spears, who is reported to have been so moved by “Idol Gives Back” that she whipped out her AmEx card (with permission from her father who has taken control of her finances) and donated $25,000.